THE DIGITAL COASE THEOREM AND THE NEWS - BY AURELIEN PORTUESE1 1 Director, Antitrust & Innovation Policy, Information Technology and Innovation ...
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THE DIGITAL COASE THEOREM AND THE NEWS BY AURELIEN PORTUESE1 1 Director, Antitrust & Innovation Policy, Information Technology and Innovation Foundation; Law Professor, Brussels School of Gover- nance, Free University Brussels (VUB).
CPI ANTITRUST CHRONICLE
Special Edition · March 2021
Regulating Digital Ads: Is a Global The Digital Coase Theorem and the News
Approach the Way Forward for Japan
and Other Advanced Economies? By Aurelien Portuese
By Renato Nazzini The rise of news aggregator apps has spurred legislative initiative
across the globe due to the lawmakers’ ability to represent the inter-
Recent Developments in Competition est of local trade associations – namely, traditional news publishers.
Law and Policy in the Digital Economy To a perceived problem, the traditional approach has consistently
been to identify the negative externalities created by news aggre-
in Japan
gator apps at the expense of traditional news publishers. The tra-
By Toshio Dokei, Arthur M. Mitchell, Hideo ditional approach nevertheless lies upon numerous pitfalls and a
Nakajima & Takako Onoki partial analysis of the situation, hence favoring inefficient outcomes.
This Article offers an alternative approach. This approach spawns
The Battles Between Google, Facebook, from the tradition first incepted by Nobel Prize Laureate Ronald Coa-
and News Media Proprietors Over Fair se. Applying the Coase Theorem to the digital journalism problem
Value Exchange for News Content identified, this Article proposes a “Digital Coase Theorem” where
an efficient outcome is reached and where innovation is optimally
By Peter Leonard incentivized.
The Rise (and Rise) of Concerns With
Bargaining Power Imbalances: A Look
at the Accc's Perishable Agricultural
Goods Report
By George Siolis & Jennifer Swart
Competition in Online Markets
By Jeff Paine, Sarthak Luthra & Edika Amin
The Digital Coase Theorem and the
News
By Aurelien Portuese
Platform Markets: The Antitrust
Challenge in India
By Dr. Geeta Gouri
Scan to Stay Connected!
Scan here to subscribe to
CPI’s FREE daily newsletter.I. INTRODUCTION: THE NATURE OF THE PROBLEM
The rise of digital platforms has enabled individuals worldwide to access news articles with unprecedented ease.2 Digital companies
have innovated and designed applications whereby individuals can access tailor-made news content (hereafter, the “news aggregator
apps”). The multiplication of news aggregator apps has not eclipsed the ascendency of two highly appealing companies to users: the
social media platform Facebook and the search engine Google.3 These two companies have designed complex algorithms to best suit
the individuals’ preferences concerning news topics and trends.
A. The Problem Identified both their own websites and their reference in news aggregator
apps were much lower than previously realized. Admittedly, news
News aggregator apps, including Facebook and Google, curate publishers’ unpreparedness to digital disruption and the increased
online third-party news but do not publish them (hereafter, the competition in news markets with online-only news platforms,
“news publishers”). News aggregators are legion and include me- thanks to the digital disruption, all contributed to a noticeable
dium-sized companies as well as digital leaders.4 On the other decrease in revenues.
hand, news publishers, from newspapers to magazines, have tra-
ditionally been slow to react to the on-going digital innovation The coalition of news publishers experiencing a loss of revenues
which has disrupted the way individuals consume news: printed generated anger, frustration, and the need to push for govern-
matter, generating income streams by selling physical copies and ment interventions, through regulations and subsidies, to pre-
by the advertising included inside, were gradually but inevitably serve the “traditional” model of curating news articles.8 Because
on the wane as individuals vastly preferred digital news format, the news aggregator apps were designated as the source of the
which in many cases were harder to monetize.5 Traditional news decline in news publishers’ revenue, governments felt the need
publishers experienced a sizable decrease in their revenues. Most to intervene to save news publishers and increase their profitabil-
of them developed their apps, and all of them were referenced ity, news publishers argued worldwide. The problem was easily
in news aggregator apps as a necessary venue for increasing web identified. The scapegoats were quickly singled out; since news
traffic to their websites.6 While on the publisher websites, readers aggregator apps used excerpts and pictures from news articles (so-
generate income through advertising revenues associated with ar- called “snippets”) protected under copyright laws, governments
ticles, through paywalls,7 or a combination of the two. had to regulate the use of protected content by news aggregator
apps. The news publishers argued these aggregator apps freerode
Nevertheless, publisher trade associations coalesced to lobby gov- on news publishers’ copyrights while generating their own adver-
ernments and raise awareness about the news publishers’ decrease tising revenue.
in revenue in the digital age. Allegedly, their revenues through
2 Damian Radcliffe & Christopher Ali, Local News in a Digital World: Small-Market Newspapers in the Digital Age, Tow Center for Digital Jour-
nalism, Tow/Knight Report, Fall 2017; Jahangir Karimi, Zhiping Walter, The Role of Dynamic Capabilities in Responding to Digital Disruption:
A Factor-Based Study of the Newspaper Industry, 32 Journal of Management Information Systems 1, 39-81 (2015).
3 Celina Ribeiro, Can Australia Force Google and Facebook to Pay for News? Wired, August, 30, 2020.
4 Angela M. Lee & Hsiang Iris Chyi, The Rise of Online News Aggregators: Consumption and Competition, 17 The International Journal
on Media Management 1, 3-24 (2015); Chris Fitzgerald, 7 Great News Aggregator Websites You Should Check Out (Plus How to Build Your
Own), Themeisle, January 13, 2021 (where none of them are either Google or Facebook); Doh-Shin Jeon, Nikrooz Nasr, News Aggregators
and Competition among Newspapers on the Internet, 8 American Economic Journal 4, 91-114 (2016); Doh-Shin Jeon, Economics of News
Aggregators, Toulouse School of Economics Working Paper N°18-912, April 2018.
5 George Brock, Out of Print: Newspapers, journalism and the business of news in the digital age, London: Kogan Page Limited (2013); Derek
Thompson, The Print Apocalypse and How to Survive It, The Atlantic, November 3, 2016; OECD, The Evolution of News and the Internet,
DSTI/ICCP/IE(2009)14/FINAL, June 11, 2010.
6 Elizabeth Grieco, Fast facts about the newspaper industry’s financial struggles as McClatchy files for bankruptcy, Pew Research Center,
February 14, 2020.
7 Or “datawall” on based on an ad-funded business model, see Tom Evens, Kristin Van Damme, Consumers’ Willingness to Share Personal
Data: Implications for Newspapers’ Business Models, 18 International Journal on Media Management 1, 25-41 (2016).
8 Kristy Hess, The government’s regional media bailout doesn’t go far enough – here are the reforms we really need, The Conversation,
August 19, 2020; Bree Nordensen, The Uncle Sam Solution, Columbia Journalism Review, September-October 2007; Jelle Boumans, Sub-
sidizing The News? Journalism Studies, 2264-2282 (2017); Marc Tracy, With Little Hesitation, Struggling News Outlets Accept Federal Aid,
The New York Times, April 29, 2020; Charles Rusnell, Financially struggling newspapers to get federal money within weeks, heritage minister
says, CBC, April 27, 2020.
CPI Antitrust Chronicle Special Edition March 2021 3In comparison, news publishers’ advertising revenues depleted negative externality created by digital platforms’ use of snippets at
mostly because individuals were satisfied with the excerpts of the expense of news publishers is equivalent to a fiscal tax, given
news articles and were often unwilling to click through to visit the the financial levy’s mandatory aspect. The economic rationale un-
news publishers’ websites. Therefore, news publishers argued that derpinning such fiscal duty appears blatant: it is a Pigouvian tax.11
news aggregator apps created a negative externality by freeriding Named after Arthur Charles Pigou, such a financial duty aims to
legally protected content. More eloquently, Facebook and Google internalize the negative externality created by the tortfeasor. Here,
were identified amongst the news aggregator apps responsible for the financial duty paid directly to news publishers is expected to
such freeriding as the perfect scapegoats. The media and Gov- cause Facebook and Google to internalize the alleged externali-
ernment then shifted their focus to consider how best to regulate ty stemming from the use of news publishers’ snippets without
their practices.9 compensation.
This problem has been addressed in two alternate, yet compara- The French approach to the problem illustrates another solution.
ble, ways the Australian solution of a Code and the French solu- The European Union has copyright legislation encompassing elev-
tion of court proceedings. en directives and two regulations. Of highest relevance, the 2019
EU Directive on copyright and related rights in the Digital Single
B. The Solutions Compared Market enshrines news publishers’ entitlement to be remunerated
for snippets referenced by news aggregators.12 The justification
The Australian Government intervened to protect tradition- for such compensation are the so-called “neighboring rights” – a
al news publishers’ income with a so-called “Media Bargaining regulation-created right granting content creators a right to be
Code.”10 Assuming that news aggregator apps, especially Face- compensated whenever a reference to their creations are made.
book and Google, enjoy an excellent monopsony power at the ex- Thus, news publishers become entitled to remuneration whenev-
pense of traditional news publishers, the Australian Government’s er snippets of their articles, albeit protective of copyrights thanks
goal is to address bargaining power imbalances between Australi- to paywalls, are referenced by news aggregators. Article 18 of the
an news publishers and digital platforms. The chosen digital plat- Directive states that “Member States shall ensure that where the
forms are only Facebook and Google due to a discretionary selec- authors and performers license or transfer their exclusive rights
tion amongst many other news aggregator apps. The mandatory for the exploitation of their works or other subject matter, they
Code forces news aggregator apps Facebook and Google to “ad- are entitled to receive appropriate and proportionate remunera-
equately” compensate news publishers for viewing monetization tion” but also paradoxically and immediately states that “in the
and revenue-sharing commitments. By designing a bargaining implementation in the national law of the principle set out in
framework to address the digital platforms’ monopsony powers, paragraph 1, Member States shall be free to use different mecha-
the Code requires digital platforms to reach an agreement, “in nisms and take into account the principle of contractual freedom
good faith,” with news publishers within three months after the and fair balance of rights and interests.” The regulator can inter-
Code comes into effect. Should the negotiations fail to reach an fere in such contractual freedom and set the allegedly appropriate
agreement or the agreement raise disputes, a third-party mediator remuneration. This is precisely what occurred in France, where
could force the digital platforms to pay for using the articles’ ex- the French Competition Authority delivered a decision on April
cerpts. The legislative obligation to financially compensate for the 9, 2020, where interim measures against Google were imposed.13
9 Cecilia Kang, The Decimation of Local News Has Lawmakers Crossing the Aisle, The New York Times, January 12, 2020; John Horgan,
How Facebook and Google are killing independent journalism, The Irish Times, July 13, 2016; Shira Ovide, Google and Facebook Killed Free
Media, August 9, 2016; Jawad Iqbal, Tech giants can’t be allowed to kill local journalism, The Times, October 6, 2020; Adrienne Lafrance,
The Mark Zuckerberg Manifesto Is a Blueprint for Destroying Journalism, The Atlantic, February 17, 2017; Jill Lepore, Does Journalism Have
a Future? The New Yorker, January 28, 2019.
10 The Parliament of the Commonwealth of Australia, House of Representatives, Treasury Laws Amendment (News Media and Digital Plat-
forms Mandatory Bargaining Code) Bill 2002, December 9, 2020, https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;page=0;que-
ry=BillId:r6652%20Recstruct:billhome; Australian Competition & Consumer Commission, Mandatory News Media Bargaining Code, Concepts
Paper, May 19, 2020, https://www.accc.gov.au/system/files/ACCC%20-%20Mandatory%20news%20media%20bargaining%20code%20
-%20concepts%20paper%20-%2019%20May%202020.pdf.
11 Arthur Charles Pigou, The Economics of Welfare, London: MacMillan & Co. Ltd (1920), https://archive.org/details/dli.bengal.10689.4260.
12 Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single
Market and amending Directives 96/9/EC and 2001/29/EC, L 130/92, May 17, 2019.
13 French Competition Authority, Decision 20-MC-01 of April 9, 2020 on requests for interim measures by the Syndicat des éditeurs de la
presse magazine, the Alliance de la presse d’information Générale and others and Agence France-Presse, April 9, 2020, https://www.autorit-
edelaconcurrence.fr/sites/default/files/integral_texts/2020-06/20-mc-01_en.pdf.
4 CPI Antitrust Chronicle Special Edition March 2021The claimant, the French trade association of news publishers and commonly thought of as one in which A inflicts harm on
others (“Alliance de la presse d’information Générale” and others B and what has to be decided is: how should we restrain
and Agence France-Presse), protested that Google preferred to no A? But this is wrong. We are dealing with a problem of
longer show snippets rather than remunerating news publishers a reciprocal nature. To avoid the harm to B would inflict
for snippets’ display. After having granted Google free licenses for harm on A. The real question that has to be decided is:
their snippets’ use and display, news publishers were granted the should A be allowed to harm B or should B be allowed
right to force Google to display and pay for these snippets, even to harm A? The problem is to avoid the more serious
though the European Directive and French implementing law harm.”16
only required duty to negotiate fairly should Google want to dis-
play snippets. The Paris Appeal Court has confirmed the French In the problem inquired, we can certainly acknowledge the use by
competition authority’s decision on October 8, 2020.14 Akin to digital platforms of articles’ snippets under copyright protection.
the Australian approach where the forced display of snippets is as- However, these snippets are licensed for free to digital platforms
sociated with a forced remuneration, the French approach to sue such as Google and Facebook.17 Additionally, many news pub-
Google is tantamount to enforcing a Pigouvian tax. The French lishers post these snippets themselves on social media platforms.18
decision requires Google to enter negotiations with no other out-
come possible but to display and pay for the snippets it wanted More importantly, the externalities never are one-sided, as elo-
to withdraw. quently demonstrated by Ronald Coase’s demonstration of the
reciprocal nature of the problem of transaction costs. Indeed, in
Both approaches, the Australian Code and the French proceed- our case, Google and Facebook (and many other news aggregator
ings, entice a Pigouvian tax aimed at internalizing the perceived apps) may cause an externality by using and referencing snippets
negative externality created by Google or Facebook when using created and curated by news publishers. However, Google and
snippets of news publishers’ articles. Both approaches, it can be Facebook’s use of snippets also generate incommensurable bene-
argued, have pitfalls if one ponders the reciprocal nature of the fits to news publishers; it provides free referencing, thereby devel-
problem identified. oping web traffic to websites where the news publishers can earn
revenues through advertisements and paywalls.19 Consequently,
C. The Reciprocal Nature of the Problem the news aggregator apps, notably Google and Facebook, generate
a positive externality towards news publishers. Their referencing
Both approaches address the identified disagreement as a prob- generates massive web traffic and high exposure to internet users’
lem where digital platforms, arbitrarily confined to Google and attention. They attract clients to news publishers’ websites in the
Facebook, are considered freeriding on the value created by news manner of Yellow Page listings used to attract potential clients to
publishers without generating an added value when displaying professionals. The fact that Google and Facebook, among others,
snippets. This inaccurate view overlooks the so-called reciprocal reference news publishers’ websites for the latter to generate prof-
nature of transaction costs, as seminally emphasized by Nobel its once the end-users browse these websites inevitably leads to
Prize laureate Ronald Coase.15 Coase indeed stressed that: the conclusion that the externality thus created is positive.
“The traditional approach has tended to obscure the na- The positive externality was acknowledged both in Spain and
ture of the choice that has to be made. The question is Germany, where, in both countries, Google and Facebook were
14 Paris Appeal Court, Société Google LLC, Société Google Ireland Ltd, Société Google France SARL c/ Le Syndica des Editeurs de la
Presse Magazine (SPEM), Agence France-Press (AFP), Alliance de la Presse d’Information Générale, 20/08071, October 8, 2020, https://www.
autoritedelaconcurrence.fr/sites/default/files/appealsd/2020-10/ca_20mc01_oct20.pdf (available only in French).
15 Ronald H. Coase, The Problem of Social Cost, 3 The Journal of Law & Economics, 1-44.
16 Id. at p.2.
17 This free licensing raises doubts as per the reality of the protected nature of the snippets since copyrights owners may legitimately be
claimed to have implicitly, with this free licensing, waived off its claims on the snippets.
18 Again, the nature of the protected content may be put into question since, assuming the copyright owner cannot generate a self-inflicted
harm, the copyright owner can be alleged to have abandoned his copyright claims.
19 Deloitte, The impact of web traffic on revenues of traditional newspaper publishers. A study for France, Germany, Spain, and the UK,
March 2016; Susan Athey, Markus M. Mobius & Jeno Pal, The Impact of Aggregators on Internet News Consumption, Stanford University
Graduate School of Business Research Paper N°17-8, (2017); Alice Ju, Sun Ho Jeong & Hsiang Iris Chyi, Will Social Media Save Newspapers?
Examining the effectiveness of Facebook and Twitter as news platforms, 8 Journalism Practice, Issue 1, (2014); Charlotte Tobitt, Facebook
and Google referrals boost contributed to jump in news traffic at start of Covid-19 crisis, Press Gazette, July 31, 2020.
CPI Antitrust Chronicle Special Edition March 2021 5required to compensate for the news snippets.20 Instead of forced the cattle-raiser pays the farmer to fence the crop since the farmer
pay, the digital platforms de-referenced and started to shut their is the one who can minimize the costs most cheaply. However, the
news services in these countries. Immediately, web traffic for news traditional approach assigns liability to the cattle-raiser to fence
publishers plummeted. Their reactions were unanimous; publish- his land at a more significant cost than the farmer would fence
ers preferred to revert to the previous situation where news aggre- his. Most fundamentally, the ideal solution envisaged by Coase
gator apps were “freeriding” by using snippets for free. Indeed, is prevented from occurring in real life due to a formidable im-
the negative externality cost is much lower than the benefit de- pediment present in all interactions: the presence of transaction
rived from increased web traffic to the publishers due to the use costs. Because the cattle-raiser and the farmer may be hindered
of snippets. Therefore, the news publishers are the cheapest-cost from bargaining (due to opportunism, the number of actors in-
avoiders here. Publishers can avoid the costs by not requesting fi- volved, the information asymmetries, etc.…), such Coasian bar-
nancial compensation for the snippets and instead allowing news gaining cannot occur, and a less efficient solution prescribed by
aggregator apps to freeride by not requesting compensation for traditional liability rules will be enforced. This is the problem of
the snippets. The cheapest-cost avoiders (i.e., news publishers) transaction costs, whereby efficient outcomes are out-of-sight due
could maximize their benefits while allowing digital platforms to to high transaction costs. Absent transaction costs in a theoretical
generate benefits. Mutual gains from bargaining over snippets’ world, the assignment of property rights becomes less relevant
rights could be developed given the imbalance between the small since market actors will be able to bargain over their property
costs incurred by the use of snippets (namely, opportunity costs rights to reach efficient, mutually beneficial solutions identifying
of missed compensation) and the considerable benefits generat- the cheapest-cost avoiders of any damage.
ed by these snippets (namely, increased web traffic and increased
revenues). In our case of neighboring rights granted to news publishers, the
number of news publishers and the presence of many opportun-
Consequently, as Ronald Coase had argued in his seminal ex- istic behaviors (such as rent-seeking practices, hold-up problems,
amples, the problem identified is reciprocal nature. Thereby, the etc.…) prevent news publishers and the digital platforms from
problem at stake enables us to delineate the contours of a “Digital reaching a mutually beneficial agreement where the social cost
Coase Theorem.” is minimized by the proper identification of the cheapest-cost
avoider. Moreover, property rights are poorly assigned despite leg-
II. THE DIGITAL COASE THEOREM islative attempts to clarify; neighboring rights may contradict ac-
cess rights. Neighboring rights may also unduly expand the reach
A. The Problem of Transaction Costs of copyright protection to allow for opportunistic behaviors and
prevent the free use of ideas and content deliberately circulated
In his article from 1960, Ronald Coase used the example of a by the content creator. Because both transaction costs are high
neighboring property’s occupation by a cattle-raiser. He consid- and because property rights are poorly designed and enforced,
ered that whenever the costs of the crop damaged are greater than Coasian bargaining can hardly take place in an environment
the net benefits derived from the sale of the undamaged crop, then where the cheapest-cost avoider may very well be the one most
the two neighbors may enter into a mutually beneficial bargain incentivized to adopt opportunistic behavior thanks to political
according to which that tract of land is left uncultivated.21 Coase sympathies.
then demonstrates that irrespective of the liability rules (whether
the cattle-raiser is responsible for damages or the farmer is respon- The Coase Theorem, coined after Ronald’s Coase article, which
sible for protecting the crop), a mutually beneficial bargain would emphasized the potential for Coasian bargaining in a costless
be reached if property rights are well assigned, and transaction transaction world, has spurred a vast amount of literature and
costs are low. Coase contemplates that the mutually beneficial policy insights.22 A political Coase theorem has been proposed
outcome, which minimizes the social cost, may very well be that
20 Joan Calzada & Ricard Gil, What Do News Aggregators Do? Evidence from Google News in Spain and Germany, 39 Marketing Science
1, 134-167 (2020).
21 See, more generally, Steven Medema, Richard O. Zerbe, The Coase Theorem, In The Encyclopedia of Law and Economics. Ed. Boudewijn
Bouckaert and Gerrit De Geest. Aldershot: Edward Elgar; Steven Medema, The Coase Theorem at Sixty, 58 Journal of Economic Literature
4, 1045-1128 (2020).
22 For relevant reviews of literature, see Steven Medema, Richard O. Zerbe, The Coase Theorem, In The Encyclopedia of Law and Econom-
ics. Ed. Boudewijn Bouckaert and Gerrit De Geest. Aldershot: Edward Elga; Herbert Hovenkamp, The Coase theorem and Arthur Cecil Pigou.
Arizona Law Review 51 (3): 633-649 (2009); Steven Medema, The Coase Theorem at Sixty, 58 Journal of Economic Literature 4, 1045-1128
(2020); Cento Veljanovski, The Coase theorem—The Say’s law of welfare economics? Economic Record 53 (December): 535-541 (1977);
Warren J. Samuels, The Coase theorem and the study of law and economics. Natural Resources Journal 14 (January): 1-33 (1974).
6 CPI Antitrust Chronicle Special Edition March 2021in a voters’ environment.23 In contrast, a linguistic Coase the- but some advocates suggest that this rule may be desirable ac-
orem has been suggested in a multilingual environment where cording to them.
bargains may take place over linguistic rights.24 Our present case
may further foster Coase’s legacy with a so-called Digital Coase Under the fourth and final proposition, the rights are allocated
Theorem. to the digital platforms under a liability rule. Digital platforms
are entitled to use news publishers’ snippets and are entitled to
B. The Importance of Allocation of Rights compensation for the benefits generated for news publishers. On
the other hand, news publishers are allowed to be compensated
Let us scrutinize the problem before us. Allocation of rights could for snippets by digital platforms. The two compensation awards
differ depending on the outcome desired by the lawmakers.25 are canceled out so that the party that generates more positive
externality to the other party creates negative externalities. That
Under the first proposition, the rights are allocated to news pub- party becomes the net benefactor of compensation from the oth-
lishers under a liability rule. News publishers are entitled to be er party. In our case, rather than having digital platforms being
compensated for any damage, use, and reproduction of any part requested to compensate news publishers for the use of snippets,
of their created content. Copyrights and neighboring rights are such liability rule with rights assigned to digital platforms may
enforced to the broadest extent, thereby including any use by any ultimately lead to news publishers paying (or at a minimum al-
their content by any digital platforms. This is a liability rule as- lowing) digital platforms for the use of snippets. Such use in-
signed to news publishers where damages are acceptable subject creases web traffic and generates advertising as well as pay-articles
to appropriate compensation. This liability rule is the traditional revenues.
approach used in Spain and Germany.
C. The Alternative Approach
Under the second proposition, the rights are allocated to news
publishers under a property rule. News publishers are entitled to It must be noted that each of the propositions results in different
prevent any trespass by third-party onto their property, protected outcomes. Contrary to the Coase Theorem, we assume that trans-
content, and content subject to neighboring rights. The property action costs are positive and that information is asymmetrical.
rule paves the way for injunctive relief claimed in courts, with the Consequently, the assignment of rights matter when looking to
trespasser urged to no longer use protected content. The proper- reach an efficient solution. The efficient solution is the one where
ty rule both entitles for compensation against the trespasser and the cheapest-cost avoider mitigates the costs, and the wealth max-
an order to return to the ante-trespass situation. The property imizer compensates the cheapest-cost avoider for the mitigation
rule assigned to news publishers has enabled news publishers to costs. In our case, it can reasonably be assumed that the cheap-
request injunctive reliefs against digital platforms and ultimate- est-cost avoiders are the digital platforms since they can most eas-
ly having the latter barred from using news publishers’ snippets. ily mitigate the opportunity costs of not sharing news content,
This rule has never been applied since the news publishers derive and thereby creating wealth through advertising and paid-articles.
benefits from the digital platforms’ use of snippets as outlined On the other hand, news publishers are the ones who initiate
above in discussing the reciprocal nature of the problem. wealth-creation by creating content, and therefore they need to
be optimally incentivized to create this content. They will receive
Under the third proposition, the rights are allocated to the news the optimal incentive once they know their content will be widely
publishers as inalienable rights. Akin to the property rule, the shared and viewed while reaping benefits for every viewer.
inalienability rule proscribes trespassers to use any protected or
related content and orders them to affect the situation that ex- Consequently, the digital platforms may hypothetically compen-
isted before the trespass occurred. However, the inalienability sate news publishers for the use of protected content. In return,
rule differs from the property rule by prohibiting news pub- news publishers may compensate digital platforms for the web
lishers from contracting and bargaining over the use of snippets traffic created as part of the news referencing. Once equalized,
by third parties. The inalienability rule prescribes that under these two compensations may reveal a net positive externality
no circumstance a news publisher can consent to have a third from digital platforms to news publishers’ benefit because of the
party using protected content, irrespective of the contractual unequal financial flows. Therefore, should Coasian bargaining
arrangements. The inalienability rule is nowhere yet enforced, take place, a net payment from news publishers to digital plat-
23 Francesco Parisi, Political Coase Theorem, 115 Public Choice, 1-26 (2003).
24 Aurelien Portuese, Law and Economics of the European Multilingualism, 34 European Journal of Law & Economics, 249-325 (2012).
25 Guido Calabresi, A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harvard Law
Review 6, 1089-1128 (1972).
CPI Antitrust Chronicle Special Edition March 2021 7forms may prove to be the most efficient outcome where the so- cial cost is minimized, and the value creation is maximized.26 Unfortunately, not only may such an efficient outcome prove hard to materialize because of the presence of transaction costs, but most utterly, the law has increased transaction costs by pro- moting opportunistic behaviors. The law has indeed unreservedly sided with news publishers against digital platforms by designing a liability rule together with a Pigouvian-like tax. Not only are the identified tortfeasors compelled to pay, but they are also com- pelled to pay for a service they have become compelled to deliver. This socially detrimental outcome overlooks the flawed identifica- tion of tortfeasors – namely Google and Facebook – by ignoring the externalities’ reciprocal nature that is inevitably generated. On the contrary, in the presence of high transaction costs, the law should mimic Coasian bargaining, whereby an efficient outcome is reached for the benefit of social welfare and digital innovation. Re- ducing the cost of accessing information while ensuring that news creators are fairly remunerated should be the law’s objective. 26 More generally, on the antitrust implications of Coasian bargaining, see Alan, J. Meese, Antitrust balancing in a (near) Coasean world: The case of franchise tying contracts. Michigan Law Review 95 (1): 111-165 (1996). 8 CPI Antitrust Chronicle Special Edition March 2021
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